The European Union’s highest court ruled on Sept. 10 that Apple must pay a €13 billion ($14 billion) fine due to tax benefits received in Ireland. The European Court of Justice (ECJ) found that failing to pay taxes proportional to revenue constitutes “unlawful aid” and gives Big Tech companies an unfair competitive advantage. This ruling serves as a strong warning against funneling profits through low-tax jurisdictions. The Wall Street Journal (WSJ) described the decision as a “win for [EU] competition authorities in their efforts to rein in alleged abuses by big tech companies.” Experts suggest that the same rationale could apply to other major platforms like Google, which has shifted Korean revenues to Singapore to avoid corporate taxes. The savings from such tax avoidance can contribute to lower prices for services like YouTube Music.
The ruling may lead EU authorities to conduct further investigations into the corporate tax rates that member states apply to global tech giants like Apple. Farhan Azeem, transfer pricing director at PKF Littlejohn, suggested, “Multinational companies that have benefited from establishing European hubs in Ireland are likely to face increased scrutiny.”
In South Korea, big tech companies such as Google and Netflix have also been criticized for tax avoidance. Google does not account for significant revenue sources like app store commissions, YouTube ad revenue, or YouTube Premium membership fees as part of its South Korean earnings. Instead, it transfers most of this revenue to its Singapore branch, citing reasons such as server locations. Google Korea reported a revenue of 365.3 billion won last year, but a recent report by the Korean Financial Management Association (KFMA) estimates the actual figure could be as high as 12 trillion won. Similarly, Netflix lowers its tax burden by paying most of its South Korean revenue to its headquarters as service fees, thereby reducing its operating profit.
The taxes avoided through these practices can be reinvested into local operations, such as lowering subscription fees for services like YouTube Music or funding music content acquisition. YouTube Music, which is bundled with YouTube Premium, has outpaced the domestic service Melon to become the leading music streaming platform in South Korea. An industry insider said, “While domestic companies pay hundreds of billions in taxes, global platforms pay less than a thirtieth of that. The competition is fundamentally unfair.”
Professor Jeon Seong-min of Gachon University’s College of Business said, “While the U.S. and China use their platforms to bolster economic and political influence through ‘state platform capitalism,’ Europe has countered with regulations like the Digital Markets Act,” adding, “South Korea, too, must develop a national strategy to effectively address foreign platforms, similar to Europe’s approach.”
